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National Restaurant Association - Restaurant job growth firm despite tighter labor market

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Restaurant job growth firm despite tighter labor market

Although restaurants continued to expand payrolls at a steady pace in November, there are indications that the labor pool is becoming shallower.  As the economy nears full employment and teen participation in the labor force remains dampened, the industry’s labor challenges are likely to intensify in the near future, according to the NRA’s Chief Economist Bruce Grindy.  His Economist’s Notebook commentary and analysis appears regularly on Restaurant.org and Restaurant TrendMapper.

The restaurant industry continued to expand payrolls at a solid pace in November, according to preliminary figures from the Bureau of Labor Statistics (BLS).  Eating and drinking places added a net 31,500 jobs in November on a seasonally-adjusted basis, the fourth consecutive month with gains above 30,000. 

Overall, restaurant employment was up 3.6 percent through the first 11 months of 2015, which puts it on pace to register its fourth consecutive year with growth of at least 3.5 percent.  In addition, 2015 will mark the fifth consecutive calendar year in which restaurants added at least 300,000 jobs.

Although job growth has been strong in recent months, there are indications that the labor pool is becoming shallower.  In the November edition of the NRA’s Restaurant Industry Tracking Survey, recruiting-and-retaining employees topped the list of challenges facing restaurant operators’ businesses.  One in five operators say ‘recruiting-and-retaining employees’ is the number-one challenge currently facing their business, which is up from just 4 percent a year ago at this time.

The primary reason for the recent tightening in the labor market has been the steady improvement in the U.S. economy.  The national economy added a net 211,000 jobs in November, the 62nd consecutive monthly gain for a total of more than 12.6 million jobs.  In addition, the nation’s jobless rate stood at 5.0 percent in both October and November, the lowest level since April 2008. 

However, another critical factor impacting the availability of workers for the restaurant industry is a sharp decline in the number of teenagers willing to dip their toes in the labor pool. 

At its peak in the late 1970s, roughly 58 percent of 16-to-19-year-olds were in the labor force. This participation rate remained above 50 percent until 2001, when it started trending downward. The Great Recession exacerbated this decline, with the teen labor force participation rate plunging from 41.3 percent in 2007 to just 34.0 percent in 2014 – a record low.

The net effect was a decline of 1.4 million teenagers in the labor force between 2007 and 2014, a development that was reflected in the restaurant workforce. In 2007, 16-to-19-year-olds represented 20.9 percent of the restaurant workforce. By 2014, these teens made up only 16.6 percent of restaurant employees. 

To be sure, the restaurant industry is still the economy’s largest employer of teenagers, providing jobs for 1.5 million individuals between the ages of 16 and 19. Put another way, one-third of all working teenagers in the U.S. are employed in a restaurant.

However, the shrinking teen labor pool has led many restaurant operators to look to alternative age cohorts to fill their staffing needs.  Factoring in an economy that is trending toward full employment, it is likely that this practice will intensify in the near future. 

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